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On Wednesday, the Berkeley School Board will receive a revised budget for 2012-13 that continues the District’s fiscally responsible strategy that has protected Berkeley public school students in recent years. “We have heard about the pain in other school districts from furlough days, significant layoffs, increasing class sizes and school closures -- but not in Berkeley,” says Co-Superintendent Javetta Cleveland. “We managed the State’s budget uncertainty, kept cuts away from the classroom, and prevented layoffs.”

In the revised budget’s three-year projection, Berkeley Unified School District (BUSD) will be relatively balanced with moderate deficit spending. The District is able to withstand the deficit spending because its prudent budgeting in recent years produced a reserve that is $8 million dollars above the State-required reserve. According to Cleveland, “We now have an opportunity to identify needs, address employee compensation, and move all of our schools more confidently towards our academic goals.”

The District’s current positive financial picture is the result of several factors. First, moderate and strategic budget reductions were made in the central office, food service, adult education, summer school, and instructional materials. Second, strategies for improving student attendance increased revenue from the State. Third, funds provided by Berkeley taxpayers through the Berkeley Schools Excellence Program (BSEP) continue to sustain key programs in the District. Fourth, the use of $9.8 million in one-time Federal Stimulus funds was maximized to prevent layoffs. In addition, the State threatened additional cuts that were later partially restored, which contributed to the reserves.

If Proposition 30 had failed this past November, the excess reserves would have been depleted within two school years. While Proposition 30 prevented threatened cuts, it did not restore all of the funding that had been cut during the recession. Over a five-year period, the State reduced the BUSD budget by $8 million, and since 2008 has offered no cost of living adjustment. Overall, the future picture is positive – but the effects of years of inadequate funding and significant uncertainty remain.

After four years of no revenue increases from the State, the Governor has proposed a budget that includes a mere 1.65 percent increase for K-12 public education. The 1.65 percent increase is not even enough to keep pace with the increased operating costs and salary adjustments to which the District has already agreed. The Governor has also proposed a substantially different funding formula for California’s public schools that includes revenue specifically directed at addressing the needs of English Language Learners and socio-economically disadvantaged students. The State Legislature has not approved this proposed funding formula, and the impact to future Berkeley Unified budgets remains unknown. In addition, due to the federal sequester, the District stands to lose an additional $300,000 annually. There are also questions about the long-term fate of other sources of revenue, including the $4 million the District receives annually for desegregation.

Berkeley Unified, like employers and employees across the nation, has been facing dramatic increases in health care costs. Co-Superintendent Neil Smith shared his concern for the rising cost of health care, noting, “We are very concerned about the significant rise in health insurance premiums and recognize that as health costs have continued to increase, the majority of employees are bearing those additional costs.” Currently, the District pays $9.5 million annually to cover employee health care costs. A cap on BUSD’s contribution to employee health care costs was negotiated as part of salary increases in 2006-07. A percentage was added to cover health care costs above the cap. However, for most employees, health care costs have continued to rise while there has been no additional revenue with which to provide salary increases since 2009.

Recognizing the financial struggle faced by teachers and staff, this year the District provided teachers and staff a one percent bonus totaling more than $820,000. Co-Superintendent Cleveland pointed out that while cuts to revenue have subsided, California continues to underfund public education, “Our employees work hard everyday; we all hope the State will recognize the value of a quality education for all of California’s children and youth so we can adequately compensate our employees and keep up with the rising costs of insurance premiums.”

Contract negotiations are now taking place again with all represented employee groups. Negotiations are a confidential matter and cannot be discussed in public without violating that confidence.

Berkeley Unified School District’s Second Interim Budget for 2012-13 will be presented to the Berkeley School Board at the meeting on Wednesday, March 13th. More information on the state of the District’s financial outlook will become available following the release of the Governor’s May Revise Budget for 2013-14 and subsequent votes by the State Legislature on the implementation of any new funding formula for California’s public schools.